Tuesday, May 29, 2007

Apparently, the federal Liberal Party -- tired of the reputation it painfully acquired in the nineties for fiscal discipline and economic literacy -- has decided seventies nostalgia is the road back to power. Former Bank of Montreal economist John McCallum, sounding oddly like a British sailor inveighing on the importance of Iran's rights under the Law of the Sea, says ""The government should hold back decisions on major foreign acquisitions and any changes to foreign ownership rules" until a new Investment act protecting "global champions" is put in place.

If the Liberals go through with this, it will benefit neither Canada's entrepeneurs nor her workers. Everyone who starts or builds a business is motivated by the desire to increase its value. The value of a business is what the highest bidder would pay for it. If you eliminate a class of bidders or require them to go through an uncertain and costly regulatory process, then they will pay less and therefore the business will be worth less. Ultimately, it will be harder to finance in the first place. Some Canadian entrepeneurs who would have succeded in a world without foreign investment review won't even exist in a world with it. .

Workers will lose too. Businesses are ultimately deals between suppliers of labour and suppliers of capital. Each side of a transaction benefits from competiton on the other side. To the extent Canadian workers can only be employed by Canadian capital, their opportunities and (on average) their income will be reduced. The only real winners will be Canadian rentiers, who will be able to pick up assets for less, although in the nature of these things the gain to them will be less than the loss to everyone else.

According to the Globe story, the Liberals deny that a moratorium on foreign takeovers until a new Foreign Investment Review Act can be put in place is "protectionist." To the extent that there is a difference between regulatory restrictions to keep ownership of companies Canadian and standard-issue protectionism, the advantage is all on the side of protectionism. Despite its economic costs, I can see a social rationale for protectionism to preserve jobs. There is no rational benefit to making sure the shareholders spell "colour" properly.

Thursday, May 24, 2007

One might very well complain about his lack of capacity for coherent or logical thought, but one must respect Andrew Sullivan's ability to spot a trend. This respect should be doubled when he isn't emotionally invested in the occurrence of the trend. So when he says he thinks Barack Obama is going to win the Democratic nomination and the general election, I pay attention. Especially since I've been saying the same thing, albeit until now not in an easily-googled forum where I can be laughed at when it doesn't happen.

So bold prediction: Obama is inaugurated the 44th president of the US in January 2009.

Is this a good thing (relative to the alternatives)? I'm not sure. I'd like to see a Kucinich-Paul matchup, but I would concede the probability of such occurrence is low. Obama's foreign policy types seem to be of the Ignatieff school of bombing everyone into human rights. Still, at least his post-presidential memoirs will be readeable, something I doubt could be said of any other American politician.

Yglesias doesn't want to offend the teachers unions until the social science forces him to. (I respect him enough to think he would then.) But this leaves him open to some objections:

1. The social science can't even exist unless vouchers are allowed. We already know that private schools do better than public schools, even when socio-economic variables are taken into account. The difficulty is that children of parents able and willing to spend a large amount of money to educate their children are not like other children. But data about the success of market schools where participation is paid for requires market schools where participation is paid for.

2. As a moral matter, parental belief about whether the school is good ought to count for something, whether or not some quantitative measure backs up that belief. After all, parents are the ones responsible for their children's well being, absent serious abuse. They may make mistakes, but they will care more than social scientists and teachers' unions. Plato's view that children should be taken away from parents and given to experts to rear doesn't have a lot of explicit support in our culture, although it does seem to be the basis of the public school monopoly.

Wednesday, May 16, 2007

The Literatus complains in an e-mail to some of his friends about the state of English Canadian poetry:

By "supporting" Canadian poetry, they mean that the writing of it should be underwritten, that its practitioners should be revered and inducted into the civil service, that books and other media containing it should be produced on an industrial scale, no matter the waste; they mean that its stupidest and most nonsensical iterations should go unchallenged, because Canadian poets are a marginalized, even oppressed, minority; they mean that the manufacturing of poets is an end in itself, because every poet is a voice and every voice must speak (every voice must be heard, too, it's believed, though the project of enforced listening is a bit stalled); by "supporting" Canadian poetry, in other words, they mean everything and anything, except that it should be done well, and read.

The Pithlord, being a prosaic type, tries to be constructive:

It's interesting to think about the functions poetry filled in our culture in the past, and why it isn't doing that anymore. When my grandparents were young, poetry was Tennyson, Kipling and Longfellow, and it was a pretty fundamental form of entertainment for anyone with any cultural aspirations at all. Everybody person memorized a number of poems from the canon, and it was perfectly middle brow stuff. The modernist intelligentsia reacted against this, but the reaction made sense because everyone could recite "If." For the earliest of the baby boomers, poetry signified bohemian sophistication. But for every subsequent cohort, it seems as dated as existentialism and New Wave cinema.

What the present moment allows for is the proliferation of text-based subcultures. This ought to allow for a revival. But the critical thing is to network network network. It strikes me that, providing you have no illusions about making a living, it is now trivially easy to publish anything, especially short poems. Getting readers is harder. But for any given quality of writing, I'm sure you could get more readers than with dead trees. I have a badly-proofread blog about esoteric Canadian legal points. I've had a little over 14,000 visits since I started. About half of them are probably from the same dozen people, and another quarter are from confused seekers after pr0n. But that's still a few thousand readers. If I could write lyric poetry that moves the soul, I suspect I'd get more.

I realize that dead trees -- precisely because they are more expensive -- have more status-enhancing properties. But I'd argue that's purely a matter of inertia. A high Google ranking is ultimately just as scarce. And there is a political benefit. Poetry on the web can be read by the overeducated and underemployed while pretending to commit acts of wage slavery, thus fulfilling some of poetry's anti-capitalist and subversive ambitions.

Of course, since even time stolen from the employer has an opportunity cost, there will always be gatekeepers. From what I can tell, a consistently-updated site doesn't exist, so somebody could become a big fish in this pond quickly.

Monday, May 14, 2007

Over at Andy's, we've been discussing the dilemma of the "consequentialist" who thinks her moral views, while true, would create bad results if widely believed.

At the risk of sounding didactic, I'll back up and try to explain the jargon (especially since I might be misusing it). A consequentialist is someone who thinks that the only things that matter morally are the consequences of actions. The most familiar kind of consequentialism is utilitarianism, which evaluates those consequences on how they promote average or total happiness or preference satisfaction.

It is fairly well-established that humans do not, in fact, think about moral issues like consistent consequentialists. It matters to us whether harm was intentional, and whether it was the result of an act or omission, and whether the person who suffered it was the kind of person the actor owed loyalty to. Lies that cause no harm are still considered at least presumptively wrong. Most people think at least some kinds of consensual sex are morally problematic. Etc.

It isn't immediately obvious that this fact about our moral psychology is a problem for consequentialism. After all, our intuitive sense of astronomy conflicts with Copernicus and our intuitive sense of physics with Einstein. So it could just be that our "natural" assumptions about morality are wrong.

But what if this fact about our moral psychology means that we will actually do more harm if we try to reason as a consequentialist than we would if we used our common sense? In addition to the fact that we have moral intuitions, it is equally well-established that these are easily biased when our interests are involved. It might be that a non-intuitive consequentialist morality would be even more easily biased. Rationalizing "thou shalt not steal" may be harder than "thou shalt steal iff. the consequences of stealing on aggregate/average well being are greater than if one had not stolen."

One lesson from Hayek is that in conditions of radical uncertainty about other people's knowledge, rules-of-thumb may work better than a rationalism that implicitly assumes omniscience. Even some consequentialists seem to have thought that humans make bad consequentialist moral reasoners -- IIRC, both Stephens and Mill thought this. Robert Wright, in The Moral Animal, seems to conclude both that utilitarianism is right about the moral facts and that natural selection has provided us with a non-utilitarian moral sense and a strong ability to rationalize. He doesn't quite say that utilitarianism is bad for us, but I think it is implicit that it very well may be.

Personally, I am inclined to think that moral truth just is what normal humans would tend to converge on if they underwent both Rawlsian reflective equilibrium and a Habermasian ideal speech situation. If so, then I think thorough-going consequentialism is false. But I can respect the dilemma of a consequentialist who has thought through the implications of moral psychology. She'd have to conclude that we just can't handle the truth.

Sunday, May 13, 2007

Much of what lawyers do -- from the humblest articling student to the most conceited Supreme Court of Canada justice -- is making utterances of the form "In my opinion, the law prohibits/obliges/permits X."[1] The body of such utterances far exceeds judgments of the final court. Most are relied on without any litigation. A small group of those are tested by a trial court. A still smaller subset are tested on appeal, and the number that go to the SCC is in the low two digits per year.

Coming from an undergraduate background in academic philosophy (a.k.a. "useless wanking"), as an articling student, I idly wondered what kind of claim I was making when I made one of these utterances. I was inclined to divide the universe of propositions into positive statements of fact and normative statements of value (or theoretical and practical judgments, or isses and oughts.) Am I telling my clients certain social facts about what consequences will likely flow from what they want to do, or am I reasoning about what right requires?

Looking at this from the articling student's point-of-view, neither alternative sounds attractive. Most articling students -- because of their age, cohort and class -- think marijuana should be legalized. But if a client asks whether it is lawful to expand their product line to include THC brownies, they know that it isn't. On the other hand, ethical articling students also know that they are supposed to tell the client what the law requires, even if it is unlikely that the client would get caught for doing the opposite. But if we take Holmes' bad man theory of the law seriously, then an unlawful act that is never detected just is a lawful act. The Law Society will take a different view.

Or look at it from the justice of the final court's point-of-view. When they opine what the law is, they can't simply be stating a social fact about what will be enforced. Unless deciding one way would trigger a constitutional crisis with another or revolution, then whateve they decide will be enforced. However, at least in most cases, final court justices don't believe that they are supposed to just do whatever they think is right. There is some sense in which a final court could act lawlessly, and they accept this, at least in principle. Indeed, judges are never so comfortable as when they can say that the way they are ruling is contrary to their personal preference as to what the law should be.

In the end, I think a statement of legal opinion is a normative, not a positive, utterance. But it is a kind of normative utterance that gives more weight to authority than we moderns are inclined to do for other kind of practical judgments. The legal positivist is right to say that we are inclined to deduce a lot of legal rules this way:

But P1 is just as much a normative proposition as C. Legal positivists who imagine they have a value-free system miss this. P1 is therefore defeasible.[2] At some point, X may be exceeding its authority, and must be resisted.

Of course, any body of normative utterances can be described positively from the outside. This is what anthropologists try to do with their notorious "cultural relativism." But that's actual a difficult stance even for anthropologists to maintain, and obviously anthropologists -- to the extent they take their cultural relativism seriously -- are not supposed to participate in the development of the culture's normative thinking. Lawyers and judges are so expected, so they can't ultimately take that point-of-view.

I suppose that a revolutionary lawyer (i.e., one who denied the authority, but not the power, of the official sources of law) could be successful, but only in the way that a sociopath might be able to figure out how normal people will react morally. In each case, the outsider would have to simulate in his or her own mind how insiders think. In some way, though, the revolutionary lawyer's statement of legal opinion would be in bad faith, while those of a lawyer who would like to see the law in question changed, but accepts the overall system of authoritatively stating law, would not.

This sequence of thoughts leads me to a natural law perspective. I'll try to defend that next time I get the energy up for such abstract posts.

[1] I simplify. If you don't like it, take it up in the comments.[2] OK, not quite "therefore."

Thursday, May 10, 2007

There's an interesting discussion on these subjects and more at Andy's. The Pithlord takes the cynical view that the bull market in French immersion is as a result of its function as a separate school system for middle-class whites. Not that there's anything wrong with that.

Monday, May 07, 2007

Sunday, May 06, 2007

Those sensible souls who avoid meta-blogging should skip this next bit.

Some have written in to say how pointless are those blogs without any focus based on the proprietor's (relative) expertise. I suppose it's interesting that Brad DeLong thinks George Bush and Dick Cheney should be impeached, and that the media is unfair to his political perspective, but were it not for the fact that he is an expert in economics and can express this expertise well, I doubt I would return very often.

The loss of Supreme Court of Canada case blogging obviously could render this site nothing more than my rants and meditations on stuff I don't really know much about. I am "opinionated and vain", but I'm not opinionated and vain enough to think that people will keep coming back for that.

The Court is a fine website, but it is narrowly focused on recent SCC decisions. There is much to say about the constitutional present. But what is this thing -- the Canadian constitution -- which Good Queen Bev and her crew are screwing up? It's a constitution "similar in principle to that of the United Kingdom", so it imports the whole constitutional history from Runneymede to Bagehot. It develops out of British colonial policy to a French Catholic polity in North America through Durham to the Confederation debates. And someone in the blogosphere needs to stand up for the Privy Council. There is a lot there, and it would be interesting to see if it can be made into reasonable blog fodder.

If I have a thought about anything that could be a blog post, I'm not going to let my internal editor stop me form posting it. Turning off that editor is the key to blogging at all. So who knows what you will get. But I will come back to the Anglo-Canadian constitutional history theme.

The legal right in the United States is divided into two camps: those like Scalia and Bork who are generally hostile to judicial interference with majoritarian political process and those like Epstein and Barnett who want to see the judiciary defend economic liberty and property rights. Of course, ordinary partisans care more about results, and even the principals of the debate can show some inconsistency. (Note Thomas and Scalia's willingness to invalidate affirmative action schemes under the equal protection clause.) But the lines are undoubtedly there.

In Canada, with its tradition of parliamentary supremacy and with the left-liberal antecedents of the Charter, the idea that the judiciary should be used as a positive force for conservative goals is less common. The National Citizens Coalition (once led by a Stephen Harper) tried to take on the Rand formula, election spending restrictions. Joe Borowski tried to have abortion banned by the courts. These crusades were generally unsuccessful, confirming the supporters of parliamenary supremacy.

Saturday, May 05, 2007

"Inducing Breach of Contract" was the basis of one of the most famous dubious-threatened-lawsuits in popular culture.

The Insider tells the story of Jeffrey Wigand (played by Russell Crowe), a former VP of research and development at Brown & Williamson, who told Sixty Minutes that the cigarette companies were manipulating cigarette chemistry to increase nicotine uptake. When he left his employer, Wigand signed a confidentiality agreement (a contract). CBS initially censored much of Wigand's interview because they were worried about being sued for inducing the breach of that agreement.

Assuming without deciding that Wigand's deal with his employer would be lawful in respect of this kind of information, why should it allow a lawsuit against CBS?

Friday, May 04, 2007

I see my fatwa against the tort of inducing breach of contract has not won universal acceptance. Obviously, if this state of affairs is allowed to continue, the terrorists will have won. In hopes of attaining greater oneness, I propose to do an "economic analysis" of the relative merits of a rule allowing parties to a contract to sue 3rd parties that interfere.

For those who did not have the benefit of a U of T legal education, and might be getting a bit nervous at this point, I should hasten to explain that an "economic analysis of law" does not require the use of calculus or graphs or the investigation of empirical reality in any way. That stuff is all really hard, and if we knew how to do it, we wouldn't have gone to law school. What we will do might better be called "intuitive cost-benefit analysis," but that doesn't sound as good. We take each rule (no liability for inducing breach of contract without the use of illegal means; liability for inducing breach of contract even if the means are not otherwise illegal) and add actual costs under each rule with incentive costs. Incentive costs will be taken as the value of the exchanges that would occur in a transaction-cost-free universe and those that actually occur in the world with these rules. Whichever rule has the lower total costs (determined by intuition and thought-experiment, naturally) wins.

In tribute to the pre-1985 DC Universe continuity, we will call the world with an inducing breach of contract tort in addition to an unlawful interference with contractual relations tort Earth 1. The Pithlord-preferred reality with just an unlawful interference tort will be Earth 2.

OK, let's get started. Suppose that on Earth 1 and Earth 2, all judgments can be enforced and legal process is costless and error free. (Also, Wonder Woman and Superman are married, and Lex Luthor is Clark Kent's best friend.) Assuming as well that a defendant in an inducing breach of contract action has a claim over against the actual contract-breaker, then Earth 1 and Earth 2 will be equally efficient. The incentives will be the same because anyone worried about being sued for IBC will know that they can always recover against the actual breaching party.[1] Let's suppose Batman agrees to sell the bat cave to Hawkman, and Green Lantern is thinking of making a better offer. On Earth 2, Hawkman couldn't sue Green Lantern, so Green Lantern's incentives won't be affected, but on Earth 1, Green Lantern will still know that if Hawkman ever sues him, Batman will indemnify him, so the rule will still have no effect on his behaviour. On the other hand, Batman won't break his deal unless he is willing to compensate

Making things a bit more realistic, let's say the legal process is somewhat costly and prone to the occasional error. (And Luthor is a Republican.) Earth 1 and Earth 2 still won't be that different. It would almost never pay Hawkman to sue Green Lantern in IBC because it will always be cheaper and easier to make a case against Batman, the breaching party. All Hawkman has to show against Batman is that he had a contract, that Batman didn't perform and that Hawkman has suffered damage as a result. Against Green Lantern, he has to prove all these things, and the other elements of inducing breach of contract, as well. Who needs the grief? But if no rational agent sues in IBC, then all rational agents know this, and the incentives don't change.[2] Some inefficient contractual breaches will occur when it just won't be worth the innocent party's while to expend litigation costs and take the risk of legal error. So some incentive costs will exist, but they won't be higher on either Earth.

The existence of a cause of action in Inducing Breach of Contract becomes important when its possible that some contract breachers will be judgment proof. If Green Lantern tempts Batman into breaching his contract with Hawkman, but the Wayne estate turns out to already be heavily leveraged and insolvent, then Hawkman could be out of luck if Batman was the only one he could sue. Green Lantern might be the only deep pocket left. So on Earth 1, alleged inducers will sometimes be sued.

Obviously, Earth 1, with the tort of inducing breach of contract, has higher litigation costs.

On Earth 2, all the incentive for controlling the risk that a party to a contract will not be able to pay damages in the event of breach will be on the other party to the contract. On Earth 1, that incentive will be lessened somewhat, but there will be an incentive for people who might be considered "inducers" to do the same. I think it's fair to say that due diligence/risk management costs will therefore be higher on Earth 1, leading to fewer otherwise-efficient transactions. This is especially the case because it is easier to define and control risk when you have a contract with someone. So, again, Earth 1 is a less efficient place.

There will be a greater deterrence of breaches of contract on Earth 1 than on Earth 2. This will be a good thing sometimes (since the existence of litigation costs and errors and judgment-proofedness means that some inefficient breaches will occur on both Earths), but not always (efficient breaches will be more thoroughly deterred). Because of risk aversion and legal error, some potentially valuable interaction between Green Lantern and Batman won't happen on Earth 1, even though it would not have led to breaches of contract. Let's call the incentive effects here a wash.

The result is that Earth 2, without a tort of inducing breach of contract, is closer to the Coasian ideal of efficiency than Earth 1, with such a tort.

[1] If there isn't a claim over, then the Earth 1 will just plain suck in commercial efficiency. The disincentive to engage in inefficient breaches of contract will be less than it should be since at least some plaintiffs will sue in IBC instead, leaving the breacher off the hook. Also, socially-beneficial activity that could be considered IBC will be deterred.

[2] The existence of legal error complicates things somewhat. If there is uncertainty about the outcome of Hawkman's case, both Batman and Green Lantern might be tempted to contribute towards a settlement for less than the full amount, providing Hawkman with an incentive to sue Green Lantern, and therefore affecting everyone's ex ante incentives.

Thursday, May 03, 2007

On Andy's recommendation, I took a glance at the House of Lords' decision in OBG Limited v. Allan, in which they return to the always-murky waters of the intentional economic torts. Unusually for English jurisprudence, these played quite a role in British political history, because a century ago they brought the courts into conflict with the nascent trade union movement, contributing to the formation of the Labour Party.

I see the point to a tort for using unlawful means to damage someone else's economic interests. I do not quite understand the modern rationale for a tort of "inducing breach of contract", when the inducement is otherwise legal.

Under the doctrine of privity, contracts generally only give rise to legal obligations/rights between the parties to that contract. I understand the problem with the "rights" part of that doctrine, and am happy that our Supreme Court has relaxed it. Despite my protestations of incrementalism, I'd be even happier if they just abolished it. But while I can see why A and B could agree to create rights for C, I have trouble with the idea that they could agree to impose obligations on D, without D being in on the arrangement.

But it seems to me that the tort of inducing breach of contract does precisely that. It isn't necessary if D does something otherwise illegal. So D's "inducement" must be something D could rightfully do if the contract between A and B never existed. But that means A and B have agreed to restrict what D can do without liability.

Of course, if D does something otherwise lawful that causes B to breach its contract, then A should have a remedy -- but against B, its unfaithful contractual partner, not against the interloper D.

I suspect the injustice of imposing a liability on D it did not agree to has meant that "inducing breach of contract" has been rarely found except if D was doing something that would be stinky anyway. But then the whole thing leads to uncertainty and should just be gotten rid of. To the extent that the House of Lords seem to be emphasizing the distinction between inducing breach of contract and unlawful economic injury, I think they are making a mistake.

Tuesday, May 01, 2007

None of which is to say that Obama wasn't confused and uncomfortable with his racial identity for much of his first three decades. In fact, that's the whole point of the book. What's more — and this is the part of Dreams [From My Father] I found most peculiar — it's never really clear why. In language that's often florid and overwrought, but also oddly artificial, he tells us how he feels, but the circumstances of his life are never drawn starkly enough to make it clear why he feels the way he does.

For those not familiar with Barack Obama's memoir, he grew up with his white liberal mother and maternal grandparents. As a child, he accepted their ideal of color-blind universalism. As he emphasizes (in his thirty-something authorial voice), his life as a teenager in Hawaii in the seventies was as close to racially-idyllic as anywhere is ever likely to be. The incidents which lead to his racial consciousness -- a necessity in this type of memoir -- are totally lame, particularly when compared with slave narratives or even The Autobiography of Malcolm X. The authorial Obama is perfectly aware of this lameness, and draws it out well. (I disagree with Drum that the language is florid and overwrought. I also disagree with the target of his post, Steve Sailer, that Obama shows no sense of humor. Rather, he shows a Prairie-WASP sense of humor, dry to the extreme.)

The question is naive because it implictly imports the liberal assumption that racial consciousness is caused by oppression, an assumption Obama almost breaks free from. What Obama's story shows is that racial/ethnic consciousness is natural. The sixties liberal/nineties neoconservative desire to destroy it is about as likely to succeed as any other attempt to extirpate natural emotions. As a thoughtful person, Obama recognizes that black racial consciousness, like any other form of nationalism, can be destructive and intellectually limiting.* He hopes that it might -- tied to Christianity -- link the black bourgeoisie with the black underclass, to the benefit of both. But the principal point that leads him away from a post-ethnic liberal universalism of the Trudeau type is that it fails to meet a deep human need.

*In my own humble opinion, the real problem with Sailer's review, is that it fails to acknowledge the complexity of Obama's thoughts about black nationalism. It still has many points of sharp observation.